Rising biofuel use may push crude below $40: Expert
Crude oil prices in New York may tumble to $40 a barrel, as rising biofuel supply shaves demand growth for traditional auto fuel, said Tetsu Emori, chief commodities strategist at Japan’s Mitsui Bussan Futures.
By Agencies |
TOKYO: Crude oil prices in New York may tumble to $40 a barrel, as rising biofuel supply shaves demand growth for traditional auto fuel, said Tetsu Emori, chief commodities strategist at Japan’s Mitsui Bussan Futures.
Shifting to biodiesel and ethanol additives may slow the growth of demand for gasoline and diesel in the US, Europe, and Japan, Emori said. He predicted oil would rise to $96 a barrel in August this year because of the hurricanes in the US Gulf. Prices fell from a peak of $78.40 a barrel on July 14 after a calmer-than-usual storm season.
“Some people may say the 2006 oil bubble eventually was short-lived like a firework that sparks and disappears,” Emori said, adding “People called me crazy when I projected a couple of years ago oil to surge this year. They may do that again because I said oil may touch the $40 a barrel mark next year.”
Oil consumers are increasing use of fuels and additives that derive from corn, soybean, sugarcane, and oilseed, as they try to reduce pollution. The switch may cause a shift of money from oil futures on the New York Mercantile Exchange to the grain futures market in Chicago, Emori said in Tokyo.
Biofuels may account for 7% of global transportation energy by 2030, provided governments implement International Energy Agency policies to promote alternatives to oil, the Paris-based energy market watchdog said in its ‘World Energy Outlook 2006’ report.
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“Biofuels may be an epoch of great change for oil, possibly ending the spike in prices of crude we’ve seen in the past few years, and attract pension and commodity fund managers to pour more money into grains,” Emori said, adding “A record of $78.40 a barrel set on July 14 may eventually be the peak of oil in the years through the end of 2010.”Biofuels include gasoline blended with ethanol that’s made from sugar cane or grain and diesel mixed with vegetable oils. Prices for corn, used to make ethanol have risen 47% in Chicago this year. Oil has gained 2.4%.
Crude oil will average $62 a barrel next year and $61 in 2008 in New York, according to the median forecast of 35 analysts surveyed by a news agency.
“The growth of gasoline and diesel demand may slow at a faster-than-expected pace if the government subsidises companies distributing the biofuels and further push promoting use of the environmental-friendly fuel,” Emori said.
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